The challenges for those forcing new regulations on the global financial system were laid bare at the Australian Securities and Investments Commission’s annual forum on Monday, as those entrusted with overseeing markets in Asia and Europe highlighted the potentially stifling effect of Basel III and other laws on corporate lending.

During one of the morning sessions,
Ashley Alder
, chief executive of Hong Kong’s Securities and Futures Commission, warned it was unrealistic for new rules to be adopted across Asia on the same timetable as Western countries, given there had been no taxpayer-funded bailouts of the banking system in any Asian country after the global financial crisis. Asia would be “a full participant in the global conversation" about post-GFC regulation, but it was necessary “to ensure [global regulation] was adapted to Asian markets in various stages of development".

Laundry list of acronyms

Global financial regulation has been missing a unified Asian voice, but the Asia committee of the International Organisation of Securities Commissions is becoming increasingly vocal, warning European and United States regulators last year to tread carefully on derivative and hedge fund regulation. Mr Alder suggested this momentum would continue. He noted that the “laundry list of acronyms" imposed by the G20, Europe and US Dodd-Frank financial reforms were having a profound impact on developing economies, the engine room of global growth, and global regulation required better coordination. Otherwise, global capital markets would face higher costs and fragmentation and reduced liquidity, which would have a chilling affect on market development.

French regulators seem to be coming to the same conclusion. Addressing the same panel,
Gerard Rameix
, chairman of France’s Autorité des Marchés Financiers, said the French government realised the need for the European financial services industry to provide long-term funding to companies to restore the continent’s economic growth trajectory. “We recognise all these banking regulations – which are of course necessary – make long-term financing more difficult, and we have to find a new equilibrium between [regulation] and bank financing for corporates," he said.

Long arm of US law

The impact on developing economies of the long arm of US laws was highlighted by the chairman of HSBC Bank Australia,
Graham Bradley
. He said the terms of the bank’s unique “deferral of prosecution" settlement with regulators in the US and Britain were “completely incompatible" with local regulations in some Asian jurisdictions where HSBC operated, including Malaysia, forcing the bank to reconsider where it would lend.

The message for Asian jurisdictions from this, however, is they will need to be even more prudent to minimise risks for global banks providing capital to their companies, otherwise they might exit.

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Mr Alder said as China’s new leaders consider opening its capital markets, all regulators, especially in Asia, must ensure the gatekeepers of the system uphold high standards to avoid a repeat of the global financial crisis.